What describes pure risk?

Pure risk specifically refers to situations that involve only the possibility of loss without any chance for financial gain. This type of risk is often associated with events such as natural disasters, accidents, or illness, where the only outcomes are a loss or no loss at all. It contrasts with speculative risk, which can lead to both positive and negative outcomes, such as investments or business ventures that may yield profits or losses.

By defining pure risk in this manner, it becomes clear why the first option is the most accurate description. The focus here is on the inherent uncertainty and the potential for loss, aligning perfectly with the characteristics of pure risk. This understanding is essential for anyone involved in risk management, insurance, or financial planning, as it helps distinguish between different types of risks and informs appropriate strategies for mitigation and coverage.